In this study, a dedicated fuel injection equipment (FIE) for a 100% dimethyl ether (DME)-fueled three-cylinder engine was developed. DME has a cetane number (>55) higher than baseline diesel (40–50), making it a promising compression ignition (CI) engine fuel. However, some physicochemical properties of DME, namely lubricity, viscosity, density, calorific value, vapour pressure, incompatibility with elastomers, etc., necessitate modifications in the existing FIE to deliver a power output equivalent to baseline diesel fuelled engine. Modifications included customized DME storage tanks, supply lines, return lines, and a pneumatic pre-supply feed pump. In addition, a customized high-pressure pump (HPP) (inline mechanical pump) and a set of modified injectors with larger nozzle hole diameters were used for the DME engine. The engine speed was varied from 1000 to 2000 rpm, and off-road operating conditions were simulated using a non-road steady cycle (NRSC). A detailed evaluation of the FIE for its comparative combustion, performance, and emissions characteristics of DME was conducted vis-à-vis baseline diesel. The DME-fuelled engine showed an increase of ∼4.7% in brake thermal efficiency (BTE) under full load conditions and an increase of ∼8.32% BTE under simulated non-road-testing conditions. In addition, the DME-fuelled engine exhibited no visible smoke and negligible soot in the engine exhaust. DME combustion reduced HC emissions by ∼50% at low and medium engine speeds, and a ∼100% reduction was seen at higher engine speeds compared to baseline diesel engine. The CO emission decreased by ∼90%, and the CO2 emissions were ∼15% lower for DME. Lower exhaust gas temperature (EGT) and lower heat release rate (HRR) during premixed combustion indicated that DME-fuelled engine acted as a low heat rejection (LHR) engine. This study demonstrated a 100% DME-fueled engine with a customized FIE, delivering higher thermal efficiency and lower emissions than conventional diesel engines for on- and off-road applications.